BP pulls plug on green transition announcing major oil and gas investment

“This is a reset BP.”

That might be a bit of an understatement from the oil and gas giant’s chief executive.

The relatively new Murray Auchincloss has decided that the time has come for the firm to change direction.

More accurately, that decision has been made for him by some investors, who have been itching for a change in strategy from the multinational.

The company has announced it will increase its oil and gas production to around $10bn a year while cutting its investment in renewables and the transition by around $5bn a year.

It’s amazing the difference five years can make.

In 2020, the then chief executive Bernard Looney said BP would look to cut its oil and gas output by 40%, instead focusing more on renewables and green technology.

Then, in 2023, that ambition was scaled back to 25% by 2030.

Now it has been scrapped entirely.

Why?

Quite simply because profits to oil and gas have returned from Covid pandemic dips and some investors in the company want better returns for the money they’ve ploughed in.

The company made around $7.2bn last year, down a third on the year before, after oil and gas prices fell from the highs seen after the start of Russia’s invasion of Ukraine.

Then, of course, there is the Donald Trump factor.

While the UK Government has made it clear it won’t grant new oil and gas licences in the North Sea, the returning US President has simply decreed “drill, baby, drill”.

It means companies, such as BP, can now have more confidence to invest in the US and look to explore for more oil fields.

Not all investors have agreed with the decision and some have been very vocal.

The head of BP in the UK, Louise Kingham said the change in strategy won’t impact what the firm is doing here.

While giving evidence to MPs at a Parliamentary Committee, she said: “We are still a net zero company and endeavouring to be there by 2050 or before.

“There is going to be that 20% target on oil and gas production.

“The reduction, this is about BP capital, it’s not about BP’s ability to encourage investment and finance into these activities.”

Unsurprisingly, environmental groups have been unimpressed by the decision and warned of the dangers that more drilling will do.

The International Energy Agency has been clear no new fossil fuel projects are compatible with limiting global warming to 1.5C.

BP now plans “major” oil and gas projects to start by the end of 2027.

The company’s share price has lagged behind competitors and it has already announced major job losses with 4,700 set to go across the globe.

Scotland

BP boss announces energy giant will cut 4,700 jobs globally

BP has about 14,000 UK workers.

However, BP is not alone.

Shell and Equinor have also announced cuts in emission reduction targets, scaling back renewables investment, or ramping up oil and gas exploration.

BP isn’t shying away from its aims here.

In its press release on Wednesday, the firm said, “Together, these are expected to strengthen BP’s balance sheet, increase efficiency, and support higher returns.”

This all poses a difficult balancing act for the UK Government.

It wants investment; it needs growth.

However, it has been clear it wants to lead the way in renewable energy and climate ambitions.

Oil firms are similarly clear – if they can’t invest here, they’ll happily invest elsewhere.